Search Acumen comment: ONS House Price Index - High prices a sobering read for buyers

Search AcumenBy Legal Futures Associate Search Acumen

Andy Sommerville, Director at Search Acumen, says: “The latest ONS data reports a 9.8% house price increase compared to March 2021. The annual growth rate slowed down a little compared to February, but monthly ebb and flow is normal and not indicative necessarily of a wider trend. If you look over the last year, price growth rates have been fluctuating between 8.9% and 13.3%, which is an unprecedented level of sustained growth and March’s data shows that house prices remain at the record levels seen in February, clearly reflecting we are experiencing a continued period of high demand, supported by interest rates that still remain low by historic standards. It’s a sobering read for any would-be buyers trying to get a rung on the ladder, especially those on lower incomes, with less borrowing power. What will be more telling are the results in the coming months, where data may start to reflect the more recent reported drop in online property searches and increase in down valuations since some banks have tightened their lending rules and reduced the borrowing power of mortgage applicants.

“While demand remains extremely strong compared with the lack of available stock, a situation that has exacerbated the high pricing we have seen over the last two years, the pendulum of power from sellers to buyers will inevitably swing – to what degree is yet to be seen. Rising interest rates, along with inflation and cost of living pressures, will at some point take more heat out of the market which will bring an end to a period where record prices have been announced every month for some time. If we do see any uptick in mortgage arrears, repossessions, or simply more sellers coming to the market, then it’s sensible to anticipate a levelling out in house prices. Equity rich homeowners will remain largely immune but struggling families, first time buyers and those who need to remortgage, will sadly be disproportionately affected. The saving grace is that wages are also on the up, which may mitigate any looming decline in property values if house price to earnings ratio remains relatively stable.

“Since the interest rate rise in early May, conveyancing firms are operating at a frenetic rate to help buyers get over the line whilst their mortgage in principle still stands. The lending market is moving faster than Land Registry based valuations, making today’s transactions incredibly time sensitive on both sides of a chain. This underscores a historic problem with our transaction process; not only is it incredibly slow, but it has the very real ability to make even a timely transaction collapse. In February we saw homebuyers battle with 135-day delays, where the average time between instruction and completion jumped 48% since 2020. The digitalisation of the industry as a whole will help the market respond to future peaks and troughs, ensuring our housing market remains robust in the long term.”


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